The company's quarterly results exceeded market expectations. The company released its three-quarter report for 2021, with operating income of 3.659 billion yuan (adjusted year-on-year + 19.08%), net profit of 525 million yuan (adjusted year-on-year + 38.29%) and non-return net profit of 499 million yuan (adjusted year-on-year + 33.42%). By the end of the reporting period, the company's net operating cash flow was 280 million yuan, down 18.25% from the same period last year. Q3 achieved revenue of 1.242 billion yuan (adjusted year-on-year + 17.28%), net profit of 192 million yuan (adjusted year-on-year + 45.32%) and non-return net profit of 173 million yuan (adjusted year-on-year + 31.68%). The performance in the third quarter exceeded market expectations.
Three quarters reported large health business and table, supporting the company's performance growth. The company announced on July 7 that it had acquired 80 per cent of each of seven major health-related companies with its own capital of about 720 million yuan. According to the company announcement data, the seven bids are expected to make a total net profit of 72.38 million yuan in 2021, and the three quarterly reports have been consolidated, which is expected to provide a strong support for the accelerated growth of the company's performance. The company's major health business takes pharmaceutical makeup as the main body, and the core brands "Yao du Ren he" and "benevolence and ingenuity" have developed rapidly in the past three years, and now they have formed a multi-category product matrix of "functional skin care + daily care". The core products have been on the list of mainstream platforms such as Tmall 618 domestic products list, Tmall Mask list, Tmall Eye Cream list, and Douyin Fashion list. We believe that the company's large health business still has a lot of room for development, and is expected to become an important engine to support the company's performance growth in the future.
The expense rate has dropped slightly, and the management level of the company has continued to improve. In the first three quarters of 2021, the company's sales expense rate, management expense rate and financial expense rate were 12.17%, 5.90% and 1.27% respectively, respectively, compared with the same period last year, respectively-4.88pct/-0.69pct/+0.34pct, indicating that the company's expense rate was well controlled, the net interest rate (return to the parent caliber) increased to 14.34% compared with the same period last year, and profitability continued to improve.
Profit forecast and investment advice. It is expected that the results for 21-23 years will be 0.500.61 pound 0.72 yuan per share respectively, corresponding to the PE valuation 17.62x/14.69x/12.41x. We maintain the previous fair value of 15.8 yuan / share view unchanged, giving a "buy" rating.
Risk hint. New product competition risk; collection and other policy risks; cosmetic business growth is not up to expectations.